Trends in Wealth Management

What do the largest providers of financial investment products think are the economic trends which will drive the design of products in the near term? While there is mixed opinion as to the robustness of the United States capital markets, there seems to be uniform belief that great equity opportunities exist in Europe and in emerging foreign markets.

What do the leaders of the wealth management industry, broker-dealers and advisors, think are the major issues in providing wealth management services in the current environment? These include: overregulation and inordinate fines for minor infractions by the SEC and by FINRA; inability of the current wealth management model to provide cost-effective services to the middle class; difficulty in filling the pipeline with young advisors or diverse advisors interested in the profession; and, an accelerated swing in compensation away from charging fees based upon assets under management, moving toward “fee for service” in providing investment guidance.

These takeaways are from a program presented by Big Brothers/Big Sisters of Massachusetts Bay in conjunction with its annual “Big of the Year” fund-raising event. The program featured two industry-focused panels, comprised of presidents, CEOs and other senior executives from companies including Pershing, LPL, Voya, Hancock, PIMCO and Blackrock.

One panel discussed “robo advisors;” there was general consensus that such firms were not the platform for the future, but that their focus on greater efficiency and delivery of services online, combined with their utilization of big data, would drive modernization of what was described as a change-resistant industry.

Major overall risks? Aside (of course) from cyber security, there was substantial discussion concerning customer longevity. Mortality tables utilized by insurance companies vastly underestimate longevity, based upon advances in healthcare. “You can’t work 50 years and then live on your savings for the next 50 years” no matter how carefully you plan; this reality places substantial pressure on the advisory industry, not to mention the pressure it places upon the public.

(Interestingly and as an aside, the Boston Police Department was granted this year’s Big of the Year Award based upon its commitment to provide 25 “men in blue” to serve as big brothers or big sisters to the youth of Boston.)

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